The Life (And Mostly) Death Of Premium Web Advertising

Pivotal Research Group’s Brian Wieser likes to call it as he sees it, and sadly for premium online publishers, he just doesn’t see it for them. During a keynote presentation at OMMA
Premium Display in New York, Wieser made the case that online publishers are more or less between a rock and a hard place, because there’s simply not much on the horizon that will stimulate any
real growth in their marketplace.

The main reasons, he said, was that there is no extraordinary demand for the medium coming from new or emerging ad categories.

“In case you
can’t guess my bias,” Wieser quipped, showing a slide with his presentation’s title, “Life or Death of Premium Web Advertising,” which features an image from the movie
“Weekend at Bernie’s” with two characters propping of a decidedly deceased Bernie.

“The reality is I just don’t see a lot of growth. And there are real practical
reasons why what we have historically seen as premium display is facing real challenges,” Wieser said, adding that it is a double-whammy of a “macro environment” (you know, the
economy) “without meaningful growth” and the lack of any real endemic category demand for online publishing.

To illustrate, online publishing’s dilemma, Wieser cited the
dynamics that propel network TV’s famed – and coveted – upfront advertising marketplace, in which a “small number of broadly identical sellers” “passively
collude” to create a market of “information asymmetry” that has put the sellers in the “dominant position.”

“In a world of zero percent volume increases
[for the rest of the media marketplace] you can get 8% pricing increases every year,” Wieser said of the network upfront’s unique marketplace dynamic.

“I’ve taken 25
years of data,” Wieser said, noting that the trend is “pretty much holding” and that nothing is likely to change it anytime soon, unless advertisers “change their
preferences.”

The online publishing marketplace, Wieser characterized, as being the exact opposite, because the information asymmetry favors the advertisers and media buyers.

“It’s in the hand of the buy-side,” he said. “That information asymmetry goes the other way and creates deflationary conditions. When you have deflationary conditions it
deters investment. The industry gradually eats itself alive.”

@Ginny. I will do my best, but I'm going to be paraphrasing Brian Wieser who is the real expert, so if I get it wrong...

Basically, it means when one part of a supply-and-demand market has more information than the other side to influence the supply and/or demand.

In the case of the network TV upfront, most of the knowledge is in the hands of the sellers. The TV networks literally count the house, because the first step in the upfront "negotiating" process requires that advertisers and agencies "register" their budgets with the networks, for the ostensible reason that they need to know how much they want to buy in order to ensure they get the optimal mix of inventory and that it is available for them. But the practical effect is the networks know better than the sellers how much money is actually "working" in the marketplace and can allocate their inventory (or even withhold it for future scatter markets) based on how strong demand is.

In the case of the online publishing marketplace, Wieser argues that the information asymmetry is on the other side, because advertisers and agencies have all the key metrics on how online inventory performs for them, and there is no single dominant supplier the way the TV networks are in the upfront market, to shift the balance of information power online.

So the buyer's call the shots online, and the sellers call the shots in TV. As a result, Wieser says the networks get a built in 8% pricing growth, while online publishing will be zero pricing growth.